Much like the stock markets, equity mutual funds have produced returns that have made investors smile over the past year. Here’s a look at the five best-performing equity funds that may also offer better returns in the future.
The year 2021 belonged to equity funds with markets rebounding strongly from lows seen in 2020. Alongside equity markets, equity mutual funds delivered returns that made investors smile.
Large cap funds continued to perform strongly. These funds have helped investors avoid extreme volatility in times of uncertainty. Among the large caps, the ICICI Prudential Bluechip Fund performed better. Its one-year returns were 13.17% versus a category average of 9.46%. Even over a five-year period, the fund has beaten category returns. The fund’s recent performance has been strong as it now focuses on banks and financials. The sector is expected to perform well at a time when interest rates are about to rise. The fund bought banks and financials while selling information technology and metals. The IT Largecap sector has seen a strong correction recently while the NiftyMetal has remained in place for the past 8-9 months.
Midcaps, after a dismal performance in 2018-19, rebounded and delivered stellar returns. Among the Large and Midcap funds, Mirae Asset Emerging Bluechip Fund has always maintained decent performance. In one year, the diet outperformed NIFTY 50 by a narrow margin. It delivered 14% versus the NIFTY 50’s 13.33%. As mentioned, consistency is key, and over the five-year period this fund delivered an 18% return versus the 14.22 NIFTY 50%. Mirae Asset Emerging Bluechip Fund beat its peers by a considerable margin. The fund outperforms due to its focus on growth-oriented businesses and growing emerging companies that have the potential to be tomorrow’s blue chip companies. The fund has a habit of limiting inflows into the funds when the fund house believes it is in the interest of the investors.
Mid-cap funds have taken center stage by delivering phenomenal returns. Most funds generated returns ranging from 17% to 25%. However, PGIM Mid Cap Opportunities Fund stands out for its extraordinary performance. Over a one-year period, the fund generated returns of 30.08% compared to the category average returns of 19.23%. Even over a span of five years, it beat NIFTY 50 by a wide margin. The PGIM Midcap Opportunities Fund has performed well recently, especially after the correction in March 2020. The Midcap fund holds almost 30% allocation in small cap stocks and as the Smallcap index outperformed the Nifty Midcap and Nifty50 in the Bull Run after March 2020, the fund became a clear winner due to its higher investment in Smallcap shares.
Multi-cap funds are known to pick the best stocks across market capitalizations and deliver big gains. These funds offer the most latitude to portfolio managers. Ideally suited to medium and high risk investors, these funds have made investors happy. Active Quantitative Small Cap Fund not only beat Benchmark, but also outperformed its peers. The fund generated a return of 33.59% over a one-year period, compared to a return of 18.04% for the category. Even over a five-year period, the fund has significantly outperformed benchmark and category returns.
The performance of Quant Mutual Funds has been quite strong in recent years, especially after the COVID crisis in March 2020. Quantum Group purchased Escorts Mutual Fund in 2018 and completely changed the investment strategy. Funds now operate on VLRT – Valuation, Liquidity, Risk and Timing. The fund believes in opportunistic bets. The fund has a higher turnover rate, which means the portfolio turns over more often. In recent times, when volatility was higher, the fund performed extremely well. The Quant Small-cap fund has not only outperformed its category, but has outperformed nearly the entire mutual fund industry over the past 2 years.
Small cap funds, due to outperformance on all metrics, have drawn investors’ attention to active investment strategies. On the performance side, Quant Small Cap Fund shines among his peers. It generated returns of 51.33% in one year compared to the category average of 32.95%. Its performance over five years is also impressive. It posted gains of 20.21% while the category average hovers around 15%. The fund is 96.78% invested in Indian stocks, with 8.47% in large cap stocks, 7.15% in mid cap stocks and 71.7% in small cap stocks. As mentioned earlier, Quant Group changed its buy and hold strategy to take opportunistic bets that resulted in higher returns.
(By Abhinav Angirish, Founder, Investonline.in)
Disclaimer: These are the personal opinions of the author. Readers are encouraged to consult their financial planner before making any investment.